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Mohan Padmanabhan

KOLKATA, Nov. 15

KENYA has ushered in new policy initiatives to qualify for the benefits of the African Growth and Opportunity Act, 2000, (AGOA) Scheme and emerge as a major global trading partner from the region.According to Indian High Commission sources in Nairobi, Kenya has shown continuous progress towards meeting AGOA requirements such as market-based economy, private property rights, open rules-based trading systems and minimisation of Government interference.

According to trade sources, considering the steady growth in bilateral trade between India and Sub-Saharan Africa despite various constraints, the new AGOA Scheme-related changes were significant.

The African Growth and Opportunity Act of 2000 was signed by the former US President, Mr Bill Clinton, to offer tangible incentives for African countries to continue their efforts to open up their economies and build free markets. And on December 31, 2001, the US President, Mr George W. Bush, approved designation of some 35 Sub-Saharan African countries (which also includes Kenya) as eligible for tariff preferences under the AGOA.

As required by legislation, the Act, for determination of eligibility, decides which of these 35 countries are making progress towards a market-based economy, the rule of law, free trade, economic policies, etc. And by modifying certain provisions of AGOA, the Trade Act of 2002 substantially expands preferential access for imports from beneficiary Sub-Saharan countries.

The trade sources said under the AGOA Scheme, the Foreign Investment Property Act of Kenya guarantees investors that their investments will not be nationalised and will be given the most favourable nation treatment, also guaranteed by the nation's Constitution. The level of tariff protection applied to imports has now been reduced through unilateral duty cuts, with the highest ad valorem duty being set at 35 per cent compared to 60 per cent in 1992.

The Kenyan Government has established through an Act of Parliament Export Processing Zones Authority and EPZs, which are designed with an attractive package of incentives and administrative back-up to reduce the cost of establishing and running export-oriented business. Among the key incentives is exemption from corporate taxes for 10 years from date of sale as an EPZ enterprise, and a flat 25 per cent tax for the next 10 years. There is also exemption from all withholding taxes on dividends and other payments made to non-resident investors for 10 years as well as exemption from stamp duty on execution of any business transaction.

The AGOA Scheme also grants 100 per cent investment allowance, duty and VAT exemption on plant and machinery, equipment, raw materials and intermediate inputs.

Investors are now free to invest as 100 per cent foreign ventures or joint ventures, new ventures or participate in privatisation/revitalisation of existing firms.

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